Germany Spend $30 Billion In Greece Crisis

It's a mother load of a credit crunch and the EU led by Germany will be left to another rounds of lousy bail outs. Shots of steroids I say. Temporary energy boosters.

Whatever happened to the "stringent" economic rules to get into the EU anyway? Greece never was in good economic shape to begin with and by all accounts never really took advantage of changing its economy a-la Ireland thanks to joining the EU. Of course, Greece was a key "outpost" country and seen as an important cultural entrant. Am I off in suggesting the economic issues were overlooked for geo-political reasons?

The way I see it, and it's a simplistic thought, is let Greece and its lenders flop over. That way everyone learns the value of austerity. The massive welfare programs and entitlements in Europe is unsustainable. The problem is people have gotten used to the government bailing them out. Good luck trying to cut back. Remember when Canada tried to cut back by closing inconsequential art programs? See the uproar? Try and cut something more substantial. We'll see how far Mr. Day gets. I'm not holding my breath. Conservatives are hardly fiscally responsible either.

Anyway. Economics is attached to democracy and both are attached to the psychology of a people. Steve Erlanger of the NYT:

There are serious questions about whether the deep cuts in salaries and benefits the agreement calls for are politically sustainable over time, even as deflation will make it impossible for Greece to grow its way out of debt…


“How can Greece grow out of its debt if there is deflation?” asked Jean-Paul Fitoussi, a professor of economics at the Institut d’Études Politiques in Paris. “Deflation increases the debt burden, so we are following this virtuous circle that is bringing us toward hell. Economics has nothing to do with virtue, which can kill an economy.”…

“Unfortunately for economists, there is democracy,” Mr. Fitoussi said. “If you impose too strict a program, the population will refuse.” Some countries, he acknowledged, have responded quietly so far to deep cuts, like Ireland and Latvia. “But Greeks are not Latvians,” he said.

Politically, it may not be feasible, however, at some point it has to be done. If Greek workers take to the streets they can't expect Europe to bail them out so what's their plan? In the West, the ability to meet the cost of those entitlemets have eroded over time. Cost realities is forcing us to reform our psychology of what constitutes a healthy society. Having welfare programs for its own sake is not progressive.

The $30 billion Germany is forking over is just to meet Greece's short-term obligations. There's still the issue of actually reinventing its economy.


Even Slovakia has reservations as reported by The Inflation Trader :

Already there are concerns because little Slovakia – which is contributing less than 1% of the rescue money – is insisting that they will not disburse any monies until Greece actually cuts spending as it has pledged to do. Slovak Prime Minister Robert Fico said: "Personally, I don’t believe that the Greek parliament will be able to approve the restrictions passed by the government yesterday."

Indeed, Greece is not alone. Many countries "fudge" their accounting to hide the true cost of their spending. Nonetheless, the only way (and I acknowledge it's not a perfect solution) is to let it crash and remind them they were living on borrowed money...and time.